Why is Germany taking a big stake in a major tankmaker?
The German government will buy a 40% stake in tankmaker KNDS. The deal is as much about control in the critical defense sector as it
The German government will buy a 40% stake in tankmaker KNDS. The deal is as much about control in the critical defense sector as it is about the Franco-German relationship. The German government will buy a 40% stake in European tankmaker KNDS from the families which own it, with a plan to bring its share to the same level as that held by the French government. It sets the stage for a long-awaited IPO (initial public offering) for KNDS on the stock exchange. Berlin had been keen to have an equal share to France before the listing. The stake is expected to be worth around €6 billion, depending on the valuation of the company. The plan still requires approval from the German Bundestag's budget committee. France currently owns 50% of KNDS. The countries said in a joint statement that they had agreed on "the strategy and governance" of the company, and that they aim to maintain equal shareholding levels in the future. According to multiple media reports quoting people close to negotiations, France will soon reduce its share to 40%, so that both governments hold the same share. The remaining 20% is expected to be sold in the IPO, on both the Frankfurt and Paris exchanges. Berlin took action after Wegmann & Co, a holding company for the families which own part of KNDS, decided to sell. KNDS is Europe's biggest tankmaker and a key defense major Image: Wolf von Dewitz/dpa/picture alliance KNDS is Europe's biggest tankmaker, producing the German "Leopard 2" and the French "Leclerc" battle tanks, while also working on a next-generation Main Ground Combat System. It was formed in 2015 through the merger of German family-owned firm Krauss-Maffei Wegmann and French government-owned weapons maker Nexter.
Stefan Kornelius, spokesperson for the German government, says the deal "aims to safeguard federal interests" and that "Germany's participation in KNDS will secure long-term influence over a company that is strategically important for European security and defense capabilities." In their joint statement, the governments said: "The shared ambition of France and Germany is clear: to develop KNDS into a leading European and global defense company serving the French and German armed forces." Taking direct control of defense companies The deal has raised eyebrows as it continues a recent trend of the German government taking a direct ownership stake in a major defense company. Marco Becht, professor of corporate governance at Université libre de Bruxelles (ULB), says Germany had been somewhat exceptional compared to other European countries in that it previously had few direct stakes in companies. However, he thinks this deal points towards a desire from Berlin to both benefit from potential future earnings and have more strategic control in the increasingly important defense sector. "They think: Why do we leave all the money to be made to private investors? And why is the state not making money from these companies through being a shareholder?" Declan Power, a defense and security analyst with the Institute for International and European Affairs (IIEA), says the deal is important primarily because it shows a strong willingness on the part of France and Germany to upgrade their own defense capacity. A German "Leopard 2" tank during an exercise in March. France and Germany plan to further develop KNDS Image: Chris Emil Janssen/picture alliance "Europe does a lot of talking about it, but this deal is a tangible step towards Europe taking control of its own defense manufacturing capabilities," he told DW.
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